Does a Buyback Contract Coordinate a Reverse Supply Chain Facing Remanufacturing Capacity Disruption and Returned Product Quality Uncertainty?

Mehr Sadat Salami, Mohammadreza Eslamipirharati, Alireza Bakhshi, Amir Aghsami, Fariborz Jolai and Maziar Yazdani ()
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Mehr Sadat Salami: School of Industrial and Systems Engineering, College of Engineering, University of Tehran, Tehran 14399-57131, Iran
Mohammadreza Eslamipirharati: School of Industrial and Systems Engineering, College of Engineering, University of Tehran, Tehran 14399-57131, Iran
Alireza Bakhshi: School of Industrial and Systems Engineering, College of Engineering, University of Tehran, Tehran 14399-57131, Iran
Amir Aghsami: School of Industrial and Systems Engineering, College of Engineering, University of Tehran, Tehran 14399-57131, Iran
Fariborz Jolai: School of Industrial and Systems Engineering, College of Engineering, University of Tehran, Tehran 14399-57131, Iran
Maziar Yazdani: School of Civil and Environmental Engineering, The University of New South Wales, Sydney 2052, Australia

Sustainability, 2022, vol. 14, issue 23, 1-20

Abstract: This paper studies a two-echelon reverse supply chain (RSC) involving a remanufacturer and a collector, in which the collector receives the used products by paying a reward to consumers. The reward amount given to customers is crucial for encouraging them to exchange used products. An exchanged item is accepted if it meets the minimum acceptable quality level (AQL). Both the remanufacturing capacity and the quality of exchanged products present uncertainties. Under the buyback contract, the remanufacturer purchases used products at a higher price than in the decentralized and centralized cases from the collector. In return, the collector undertakes to repurchase a certain number of used products sold to the remanufacturer, but not remanufactured due to capacity shortages. Based on the aforementioned uncertainties, this study analyses channel coordination using buyback contracts and optimizes its parameters. By conducting a numerical analysis, we first ensure that under this contract, the risk of uncertainty is divided among the members, and that each party’s profit is higher than when decisions are made individually. Therefore, a buyback contract would guarantee a win-win situation for both of the parties, and coordination for the RSC. A range of percentages of extra items purchased by collectors is derived, as well as the amount the collector pays for each item and the effect of increasing or decreasing these values is examined.

Keywords: reverse supply chain coordination; buyback contract; the remanufacturer’s capacity uncertainty; quality uncertainty (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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